Be Sure Your Beneficiary Designations Do Not Create Conflict

How might naming a beneficiary impact my estate plan?

Beneficiary designations are an important part of any estate plan, but if handled incorrectly your beneficiary designation could create conflict with the rest of your estate plan. Traditionally, beneficiary designations are used for life insurance policies and retirement accounts. More recently, beneficiary designations have become popular for use with bank and brokerage accounts. Issues may arise, however, when a beneficiary designation creates conflict with your will or trust. Our Orange County, California estate planning lawyers discuss some important considerations for creating a seamless estate plan complete with beneficiary designations below.

Consider Your Complete Estate Plan

As the years go by, you may continue to name beneficiaries for various accounts. In the meantime, you might already have a will or a trust completed. You will need to take a look at your estate plan in its entirety to make sure you have not accidentally created a conflict.  Examine what cash you have left to the estate and what will instead pass to a named beneficiary. You will need to make sure your estate executor has access to enough cash to pay the gifts you have left to your loved ones in your will. Further, you need to leave sufficient funds within the estate to pay the estate tax liabilities. As such, it is critical that you consider where your bank accounts are going and how your beneficiary designation could have an impact.
You should further consider the pros and cons of naming individuals as your beneficiary, as opposed to your trust. Trusts offer estate tax benefits that could be undermined by instead leaving your assets to named individuals. If not enough assets are left in the trust, you could lose your tax benefits that would have been offered by the trust.

Use Care When Naming a Beneficiary

There are certainly some instances in which you will need to name a beneficiary to receive an asset. When it is appropriate to leave assets to an individual beneficiary, you will want to make sure you do so correctly. Be sure you fill out the beneficiary form with the correct legal information for the individual or trust. Take care to ensure your designation meets the goals of your estate plan and avoid needing to make last-minute changes. Contact an estate planning lawyer for assistance with naming a beneficiary and creating a comprehensive estate plan.

Brian Chew, the managing partner of OC Wills & Trust Attorneys, has extensive experience in the areas of estate planning, asset protection planning, business succession planning, long-term care planning, and veterans’ benefits. By devoting his practice to estate planning matters, he has founded a firm that strives to provide exceptional service to their clients by working closely with individuals and their families to create comprehensive and customized estate plans. For the past twenty five years, Brian has served thousands of clients in the matters of estate planning, wills and trusts. If you have any questions about this article, you can reach Brian Chew here.